As prices of Bitcoins stay volatile and analysts claim that the meteoric rise of this cryptocurrency is destined to crash soon, there is an understandable urgency amongst investors to short sell their Bitcoins. Moreover, governments in different countries have started to scrutinize Bitcoin investments and exchanges.
Earlier, when everyone was riding the Bitcoin wave, investors were buying Bitcoins and holding onto them, waiting patiently for the prices to go up. When the prices reached a comfortable level, they were selling the coins and making profits. While this was a viable option a few years back things have changed now. Today investors are showing keenness to “short” the Bitcoin.
What is “shorting” the Bitcoin?
Shorting will let you borrow an asset like the Bitcoin and sell it at the current price. You can buy the Bitcoins later to repay the company or individual you had borrowed it from in the first place. For those who do not know about short, it is a simple procedure to determine your investment play and making profits whether the value goes up or down. But this is the trickiest part and you cannot jump into it without knowing the nuances of short-selling. There are many options for short-selling the Bitcoin:
1. Direct Short Selling:
This is the easiest type where you sell the existing Bitcoins at any price you are fine with. You will hope that this value drops further and then you can re-purchase the Bitcoins at lower prices.
2. Margin Trading:
Some people short sell Bitcoins using a margin trading medium that is dedicated to cryptocurrencies. Here, you can borrow money from brokers, make a trade, and hope that the bet pays off. Many cryptocurrency exchanges will permit margin trading. Here is a short bitcoin billionaire review for you to learn how bitcoin is traded using a crypto robot.
3. Binary Options Trading:
This has a “put” option and “call” option; with the “put” option you can sell a specific amount of Bitcoins at a specific price at a specific time. The option increases in value as Bitcoins lose value. The “call” option lets you buy shares similarly. Using this contract you can buy a specific amount of Bitcoins at a particular price until a specific date, which is the expiry date.
4. Prediction Markets:
This is another means of shorting the Bitcoin; the markets let investors create an event for making a wager depending on the outcome. So, you can predict that the Bitcoin will fall by a certain percentage or margin, and if someone accepts this prediction, you end up making a profit.
Here, instead of borrowing Bitcoins from someone, selling them and re-purchasing them at lower prices later one, you simply concede to pay this difference. For CFDs, you will receive the difference when prices drop, and you do not have to undergo the hassles of buying or selling coins.
Things to remember when short-selling Bitcoins:
If you are short-selling the individual or company that you borrowed from can recall their assets at any time and they will provide you with short notice. This explains why you must read the rules and regulations with care when you short sell.
Since the market swings dramatically, the prices can also fluctuate, and you can be at great risk. Short selling becomes really risky when your lender recalls the assets before the prices have got a chance to fall.